- Oil Search (OSH) has begun front-end engineering and design (FEED) work for phase one of its US$3 billion (roughly A$3.8 billion) Pikka Project
- This work will include finalising the design scope, execution plan, budget and schedule for a single drill site, pipelines and operations pad infrastructure
- Phase one is expected to deliver 80,000 barrels of oil per day starting in 2025 at a breakeven cost of less than US$40 (around A$50.65) per barrel for Brent crude
- Pikka is the company's first major project outside of Papua New Guinea and was put on hold last year following the oil price crash in March
- Oil Search is up 1.23 per cent to $4.10 per share
Oil Search (OSH) has begun front-end engineering and design (FEED) work for phase one of its US$3 billion (roughly A$3.8 billion) Pikka Project.
With the final go-ahead for construction expected later this year, this work will include finalising the design scope, execution plan, budget and schedule, which the company said will reduce project risk and ensure the design can deliver maximum value from the "giant" Nanushuk reservoirs.
Phase one of the Pikka Project, which will be capable of producing 80,000 barrels of oil per day from 2025, will feature a single initial drill site — Nanushuk Drill Site B — as well as pipelines, operations pad infrastructure and camps.
"The team has already done a tremendous amount of work to deliver a project concept that is cost-effective over a wide range of oil prices," said Keiran Wulff, Managing Director of Oil Search.
"Through FEED we expect to deliver a more detailed and robust project that further reduces risk and improves the project's value," he added.
The project, which boasts a breakeven cost of less than US$40 (around A$50.65) per barrel for Brent crude, including a 10 per cent return, is one of several major growth investments in the global energy sector that were put on hold last year after the oil price crash in March.
But with an improving outlook, the plans have now been revived, and Pikka represents Oil Search's first major project outside of Papua New Guinea.
In order to help fund phase one costs, the company intends to sell a 15 per cent stake in the project, which it hopes will cover at least 50 per cent of total expenses.
Kieran said it was a critical part of Oil Search's overall capital management strategy, which "combined with a strengthening energy demand outlook for projects with low breakevens and low emissions intensity, will provide confidence in our ability to make a final investment decision later this year."
Madrid-based Repsol, which holds a 49 per cent interest in the Pikka Project, is also expected to sell a portion of its stake.
Oil Search is up 1.23 per cent to $4.10 per share at 12:46 pm AEDT.